nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2013‒08‒05
24 papers chosen by
Joao Jose de Matos Ferreira
University of the Beira Interior

  1. Knowledge breadth of MNC subsidiaries and the duration of host-country firms' search By Alessandra Perri; Raffaele Oriani; Francesco Rullani
  2. Asymmetric Trade Liberalisation, Sector Heterogeneity and Innovation By Antonio Navas Ruiz
  3. International Technology Diffusion of Joint and Cross-border Patents By Michael McAleer; Chia-Lin Chang; Ju-Ting Tang
  4. Diversification Strategies and Firm Performance: A Sample Selection Approach By E. Santarelli; H. T. Tran
  5. R&D and Credit Rationing in SMEs By Maria Luisa Mancusi; Andrea Vezzulli
  6. Factors that determine the evolution of high-growth businesses By Oriol Amat; Marcos Antón Renart; María José García
  7. The Machine Tool Industry in Italy: Industrial Innovations and Performances By Fabio Campanini; Serena Costa; Paolo Rizzi
  8. Technology Platforms in Europe: an empirical investigation By Lisa De Propris; Carlo Corradini
  9. International Competitiveness: is the reduction of wages a solution? An evaluation of the Portuguese case By Elsa Cristina Vaz; Maria Paula Fontoura
  10. Endogeneous matching in university-industry collaboration: Theory and empirical evidence from the UK By Albert Banal-Estañol; Inés Macho-Stadler; David Pérez-Castrillo
  11. Green investment strategies and export performance: A firm-level investigation By Antonietti,Roberto; Marzucchi,Alberto
  12. Does Accrual Management Impair the Performance of Earnings-Based Valuation Models? By Lucie Courteau; Jennifer L. Kao; Yao Tian
  13. Can Institutions explain cross country differences in Innovative Activity? By Cong Wang
  14. The Impact of Patenting Activity on the Financial Performance of Malaysian Firms By Farha Ghapar; Robert Brooks; Russell Smyth
  15. Importing, exporting and firm-level employment volatility By Christopher Kurz; Mine Z. Senses
  16. The dynamics of pharmaceutical regulation and R&D investments By Rosella Levaggi; Michele Moretto; Paolo Pertile
  17. Gap Analysis of Stakeholders’ Perception in Tourism Industry By Chavan, Rajashri Ramesh; Bhola, Sarang Shankar
  18. Learning Style and Academic Achievement of Secondary School Students By Rajshri Vaishnav
  19. An empirical study of factors influencing adoption of Internet banking among students of higher education: Evidence from Pakistan By Kazi, Abdul Kabeer
  20. Competition in tourism arrivals – A multidimensional index of geographical structural similarity By Nuno Crespo; Nádia Simões; José Duarte
  21. Factors influencing energy intensity in four Chinese industries By Fisher-Vanden, Karen; Hu, Yong; Jefferson, Gary; Rock, Michael; Toman, Michael
  22. South-South Cooperation and Inclusive Growth By Ryan Higgitt
  23. Innovation in the energy sector By Klaus Friesenbichler
  24. Foreign direct investment and institutional reform: evidence and an application to Portugal By Paulo Júlio; Ricardo Pinheiro-Alves; José Tavares

  1. By: Alessandra Perri (Università Ca' Foscari Venice); Raffaele Oriani (LUISS Guido Carli University); Francesco Rullani (LUISS Guido Carli University)
    Abstract: The aim of this paper is to investigate the factors influencing the speed at which knowledge flows from foreign to domestic firms. The focus is not on whether a knowledge spillover occurs, but on the time it takes to spread the MNC subsidiary knowledge in the local area. Filling the gap about spillover speed in International Business by means of the insights from Innovation Studies Ðspecifically, the literature on search and NK modelling-, we propose a conceptual model where the speed of local knowledge diffusion is influenced by subsidiariesÕ technology sourcing strategies. We then test our model using a database covering 1336 US patents from the semiconductors sector. We find that not only the breadth of the set of subsidiariesÕ knowledge sources slows down local knowledge diffusion, but that the delay is mainly related to the diversity of global and internal sources used by the subsidiary, hinting at strategies that MNCs can use to further protect their knowledge.
    Keywords: Speed, Search, Foreign subsidiaries, Local firms.
    JEL: O32 M16
    Date: 2013–07
  2. By: Antonio Navas Ruiz (Department of Economics, The University of Sheffield)
    Abstract: Innovation, mark-ups and the degree of trade openness vary substantially across sectors. This paper builds a multi-sector endogenous growth model to study the influence of asymmetric trade liberalisation and sectoral differences in the degree of product market competition on the effect that trade has on R&D investments at a firm level. I find that differences in the degree of competition generate large differences in firm innovative responses to trade liberalisation. A movement from autarky to free trade promotes innovation and productivity growth in those sectors which are initially less competitive. However, when the initial tariff level is common across sectors, a homogeneous tariff reduction promotes innovation in those sectors which are initially more competitive. The paper suggests that trade liberalisation could be a source of industry productivity divergence: firms that are located in industries with greater exposure to foreign trade, invest a greater amount in R&D contributing to industry productivity growth. Finally the paper outlines the importance of reallocation effects within industry and across industries that are the result of these asymmetries. An asymmetric trade liberalisation has a small but negative impact on aggregate productivity growth.
    Keywords: sectorial productivity, international trade, innovation
    JEL: F12 O43
    Date: 2013
  3. By: Michael McAleer; Chia-Lin Chang; Ju-Ting Tang (University of Canterbury)
    Abstract: With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that, if it is desired to shift from foreign to domestic technology, it is necessary to increase expenditure on R&D for business enterprises and higher education, exports and technology. If the focus is on increasing bilateral technology diffusion, it is necessary to increase expenditure on R&D for higher education and technology.
    Keywords: International Technology Diffusion, Exports, Imports, Joint Patent, Cross-border Patent, R&D, Negative Binomial Panel Data
    JEL: F14 F21 O30 O57
    Date: 2013–07–20
  4. By: E. Santarelli; H. T. Tran
    Abstract: This paper is based upon the assumption that firm profitability is determined by its degree of diversification which in turn is strongly related to the antecedent decision to carry out diversification activities. This calls for an empirical approach that permits the joint analysis of the three interrelated and consecutive stages of the overall diversification process: diversification decision, degree of diversification, and outcome of diversification. We apply parametric and semiparametric approaches to control for sample selection and endogeneity of diversification decision in both static and dynamic models. After controlling for industry fixed-effects, empirical evidence from firm-level data shows that diversification has a curvilinear effect on profitability: it improves firms’ profit up to a point, after which a further increase in diversification is associated with declining performance. This implies that firms should consider optimal levels of product diversification when they expand product offerings beyond their core business. Other worth-noting findings include: (i) factors stimulating firms to diversify do not necessarily encourage them to extend their diversification strategy; (ii) firms which are endowed with highly skilled human capital are likely to successfully exploit diversification as an engine of growth; (iii) while industry performance does not influence profitability of firms, it impacts their diversification decision and degree.
    JEL: L21 L25 C14 C23
    Date: 2013–07
  5. By: Maria Luisa Mancusi; Andrea Vezzulli
    Abstract: We study the effects of credit rationing on Research and Development (R&D) investment using survey and accounting data on a large representative sample of manufacturing small and medium size enterprises (SMEs). Our econometric model accounts for the endogeneity of our credit rationing indicator and employs an innovative theory based identification strategy. We find that credit rationing has a significantly negative effect on both the probability to set up R&D activities and on the level of R&D spending (conditioned on the R&D decision), but the overall estimated reduction in R&D spending is largely to be associated with the first effect.
    Keywords: R&D, credit rationing, Whited and Wu index, bivariate probit, IV Tobit
    JEL: G21 D82 O32 C35
    Date: 2013–07
  6. By: Oriol Amat; Marcos Antón Renart; María José García
    Abstract: The study herein discusses research aimed at elucidating the factors that contribute to a business' ability to maintain high growth. The database from the Iberian Balance Sheet Analysis System (SABI, from its initials in Spanish) was used to identify 250 industrial Catalonian businesses with high growth during 2004-2007. These companies participated in a survey on strategies and management practices; in 2013, they were re-analyzed to investigate the factors that contributed to continued growth for certain companies. Through diverse statistical techniques, business policies related to quality, innovation, internationalization and finance were shown to influence business growth and sustainability over time. High-growth businesses have been studied throughout the world, but this is the first study to investigate the evolution of businesses after a high-growth phase.
    Keywords: Quality, high-growth businesses, business evolution, financial information, innovation, internationalization.
    Date: 2013–07
  7. By: Fabio Campanini (DISCE, Università Cattolica); Serena Costa (DISCE, Università Cattolica); Paolo Rizzi (DISCE, Università Cattolica)
    Abstract: The machine tool industry has a leading role in the Italian manufacturing system, above all in Northern Italy. This industrial branch is a strategic intermediate point in many manufacture dies, with an average innovation intensity higher than that of many other industrial branches. This work investigates if and in which way the innovation and the R&D processes carried out in the sector firms affect their productivity. We built a significant sample, which answered a questionnaire based on the CIS (Community Innovation Survey). Also a regional geographic dimension is used, to test the presence of specific local effects. Results show a positive and strong contribution from human capital to productivity, while, in the short term, physical capital have a negative impact, a result probably influenced by the economic crisis.
    Keywords: Innovation; Machine tool industry; Firm productivity; Regions.
    JEL: L1 L64 O3
    Date: 2013–05
  8. By: Lisa De Propris; Carlo Corradini
    Abstract: In the last decades, innovation activity has been defined by an increasing complexity and a faster pace of the underlying technological change. Accordingly, several studies have shown that competitive systems of innovation benefit from being able to build upon a wide but integrated spectrum of technological capabilities characterised by a sustained dynamism in the level of inter-sectoral technology flows. In this context, technological platforms – defined as knowledge and scientific launching pads that spin out of key enabling technologies - may create the opportunity for technological externalities to take place across a set of related sectors through a swarm of increasingly applied and incremental innovations. In this report, we look at the presence and determinants of these technological platforms across EU Countries and explore the mechanisms through which these influence inter sectoral technology spillovers, thus fostering technological shifts and technological synthesis within the broader economy. Using data on patents and patent citations obtained from the PATSTAT-CRIOS database, covering all patent applications made to the European Patent Office (EPO), we try to model the systemic nature of technology platforms. In particular, our aim is to provide empirical evidence that the presence of key enabling technologies at the base of the platform may lead to a more sustained interaction across second tier innovations characterised by a “distant” knowledge base. Then, we endeavour to investigate the relationship that may take place between this process and the role played by the national dimension.
    Keywords: Clusters, ecological innovation, industrial innovation, innovation, innovation policy, new technologies, patents, socio-ecological transition, sustainable growth
    JEL: O3 O31 O32 O33 O38
    Date: 2013–07
  9. By: Elsa Cristina Vaz; Maria Paula Fontoura
    Abstract: The purpose of this paper is to analyse, for the case of Portugal, the effectiveness of wage reduction - a current proposal since 2011 to help the country to reverse the high public and external debt - in promoting the efficiency and international competitiveness of the economy. A static multi-sector and single-country general equilibrium model is used and data is collected from the GTAP7 Database. The model allows the measurement of changes by sector. The simulations performed show that extending the reduction of wages already deployed by the government in the public sector to the private sector leads to a positive impact on employment (both skilled and unskilled labour), production and volume of exports in all sectors except those that are R&D intensive, the latter having a low weight in the Portuguese economy. However, it is possible that the positive results in terms of external competitiveness are not sustainable, as the impact on productivity is negative, albeit small, for most sectors. There are also reasons for concern regarding the observed deterioration of the trade balance of most sectors, the exception being the traditional labour intensive sectors, which show good prospects in this respect.
    Keywords: Competitiveness, wages, Stability and Growth Pact; General Equilibrium Model, Portugal.
    Date: 2013–07
  10. By: Albert Banal-Estañol; Inés Macho-Stadler; David Pérez-Castrillo
    Abstract: We develop a two-sided matching model to analyze collaboration between heterogeneous academics and firms. We predict a positive assortative matching in terms of both scientific ability and affinity for type of research, but negative assortative in terms of ability on one side and affinity in the other. In addition, the most able and most applied academics and the most able and most basic firms shall collaborate rather than stay independent. Our predictions receive strong support from the analysis of the teams of academics and firms that propose research projects to the UK's Engineering and Physical Sciences Research Council.
    Keywords: matching, industry-science links, research collaborations, basic versus applied research, complementarity
    JEL: O32 I23
    Date: 2013–07
  11. By: Antonietti,Roberto; Marzucchi,Alberto
    Abstract: In this paper we empirically investigate the relationship between investments in environmentally-oriented equipment and firms’ export performance. Drawing on Porter hypothesis and firm heterogeneity theory, we adopt a structural model where first we estimate the impact of green investment strategies on the level of productive efficiency (TFP), and second we assess whether induced productivity influences the extensive and intensive margin of exports. Relying on a rich firm-level dataset on Italian manufacturing, our results show that firms with higher productivity, induced among other factors by green investment involving environmental protection and reduction in the use of raw materials, have increased commitment to, and profits from, exports, especially towards countries adopting a more stringent environmental regulatory framework. Our evidence provides a ‘green investment-based’ explanation for the link between TFP-heterogeneity and trade.
    Keywords: Exports, Firm Heterogeneity, Green Investment Strategy, Total Factor Productivity
    JEL: Q55 Q56 F14 F18
    Date: 2013–07–31
  12. By: Lucie Courteau (Free University of Bozen-Bolzano, School of Economics and Management, Italy.); Jennifer L. Kao (Department of AMIS, University of Alberta, Edmonton, Alberta, Canada.); Yao Tian (Department of Accounting and Finance, San Jose State University, San Jose, CA, USA.)
    Abstract: This study examines empirically how the presence of accrual management may affect firm valuation. We compare the performance of earnings-based and non-earnings-based valuation models, represented by Residual Income Model (RIM) and Discounted Cash Flow (DCF), respectively, based on the absolute percentage pricing and valuation errors for two subsets of US firms: “Suspect” firms that are likely to have engaged in accrual management and “Normal” firms matched on industry, year and size. Results indicate that RIM enjoys an accuracy advantage over DCF when accrual management is not a serious concern. However, the presence of accrual management significantly narrows RIM’s accuracy advantage over DCF from the level observed for the matched Normal firms. These results are robust to the choice of model benchmark (i.e., current stock price vs. ex post intrinsic value), alternative definitions of Suspect (i.e., loss or earnings-decline avoidance vs. earnings-decline avoidance only vs. loss avoidance only) and of Normal firms (i.e., excluding vs. including real activity manipulators), and different assumptions about post-horizon growth (i.e., 2% vs. 4%). The overall conclusion that accrual management impairs RIM’s performance extends to settings where the regression model is expanded to include accrual components and when we focus on large, rather than small, earnings manipulators. Taken together, these results highlight the importance of considering earnings quality when assessing the performance of earnings-based valuation models.
    Keywords: Accrual Management; Firm Valuation; Earnings- and Non Earnings-based Valuation Models; Valuation Errors.
    JEL: M41
    Date: 2013–07
  13. By: Cong Wang
    Abstract: Motivated by theoretical arguments that assert a positive impact of R&D on institutions, this paper aims to provide some empirical analysis on the relationship between these two variables. In particular this paper has found a significant direct effect of institutions on R&D intensity. Countries with better institutions qualities as captured by the World Banks’ Worldwide Governance Indicators (WGI) tend to attract more scientists and engineers into the research field and to spend more on R&D as well. This paper has also found evidence that the effect of institutions varies in different economies characterized by different levels of financial development and human capital accumulation, but stays relatively unchanged across countries with different levels of trade openness.
    Keywords: Institutions, innovative activity, economic growth
    JEL: F1 N7 O1
    Date: 2013–07
  14. By: Farha Ghapar; Robert Brooks; Russell Smyth
    Abstract: This study analyzes the relationship between patenting activity and financial performance at the Malaysian firm level for firms that have been granted patents in Malaysia and the United States of America. We adopt the patent renewal and profit maximization model as our theoretical underpinning for this study. The patenting activity variables are measured based on the patent renewal system and the financial performance variables are measured based on the profit margin. The sample is divided into manufacturing and non-manufacturing firms. We utilize a panel dataset spanning from 1994 to 2008 and the model is estimated using panel least squares, fixed effects, random effects and generalized method of moments with various types of effects specifications and transformations. The key finding from the empirical study is that there is a significant relationship between patenting activity and financial performance at the Malaysian firm level, but that the impact is rather small and that the signs on the coefficients are mixed. This result may reflect the level of competition that the firms faced over the period of the study, even though patenting is well known for giving firms some monopoly power.
    Keywords: Patenting, patent renewal, firm financial performance, panel data model
    Date: 2013–07
  15. By: Christopher Kurz; Mine Z. Senses
    Abstract: In this paper, we use detailed trade and transactions data for the U.S. manufacturing sector to empirically analyze the direction and magnitude of the association between firm-level exposure to trade and the volatility of employment growth. We find that, relative to purely domestic firms, firms that only export and firms that both export and import are less volatile, whereas firms that only import are more volatile. The positive relationship between importing and volatility is driven mainly by firms that switch in and out of importing. We also document a significant degree of heterogeneity across trading firms in terms of the duration of time and intensity with which firms trade, the number and type of products they trade and the number and characteristics of their trading partners. We find these factors to play an important role in explaining the differential impact of trading on employment volatility experienced by these firms.
    Date: 2013
  16. By: Rosella Levaggi (; Michele Moretto (; Paolo Pertile (Department of Economics (University of Verona))
    Abstract: The paper uses a real option approach to investigate the potential impact of performance-based risk-sharing agreements for the reimbursement of new drugs in comparison with standard cost-effectiveness thresholds. The results show that the exact definition of the risk-sharing agreement is key in determining its economic effects. In particular, despite the concerns expressed by some authors, the incentive for a firm to invest in R&D may be the same or even greater than under cost-effectiveness thresholds, if the agreement is sufficiently mild in defining the conditions under which the product is not (fully) reimbursed to the firm. In this case, patients would benefit from earlier access to innovations. The price for this is less value for money for the insurer at the time of adoption of the innovation.
    Keywords: pharmaceutical regulation, real options, R&D, risk-sharing
    JEL: I18 L51 C61
    Date: 2013–08
  17. By: Chavan, Rajashri Ramesh; Bhola, Sarang Shankar
    Abstract: The paper mainly focused to determine the stakeholder profile and establish the perception gap between tourist and service providers mainly hoteliers and tour operators. A research framework is constructed and tested using data produced by three independent surveys of tourists and tourism service providers viz. hoteliers and tour operators from the 10-tourist sites viz. Aundh, Sajjangarh, Kas, Thoseghar, Ajinkyatara, Mahabaleshwar, Panchgani, Pratapgarh, Wai and Koyna of Satara district. The study concluded that there is a difference of opinion amongst stakeholders in case of satisfaction and importance of those 33 available tourist services and amenities in the district.
    Keywords: Services, Perception, Gap Analysis, Tourism Industry, Maharashtra
    JEL: L8 L83
    Date: 2013
  18. By: Rajshri Vaishnav
    Abstract: Learning style refers to the ability of learners to perceive and process information in learning situations. One of the most important uses of learning styles is that it makes it easy for teachers to incorporate them into their teaching. There are different learning styles. Three of the most popular ones are visual, auditory, and kinesthetic in which students take in information. This study is an analysis of learning styles prevalent among secondary school students. It was conducted on three learning styles- visual, auditory and kinesthetic (VAK). It also tries to find out relation and effect of different learning styles on academic achievements of students. A sample of 200 students of class 9th, 10th and 11th standard of Maharashtra state was selected for the study. Findings of the study reveal that, kinesthetic learning style was found to be more prevalent than visual and auditory learning styles among secondary school students. There exist positive high correlation between kinesthetic learning style and academic achievement. The main effects of the three variables - visual, auditory and kinesthetic are significant on academic achievement. Key words: learning, learning style, academic achievement
    Date: 2013–03
  19. By: Kazi, Abdul Kabeer
    Abstract: This paper investigated the influence of factors on the intention to adopt Internet banking services among students of higher education in Pakistan. Theoretical framework used for this study has been adopted from Technology Acceptance Model (TAM) with four independent variables. Convenience sampling method was used with a total of valid 220 respondents, which included students of Khadim Ali Shah Bukhari Institute of Technology (KASBIT), Karachi, Pakistan. Data was collected through self administered questionnaire of two parts: Demographic and Likert scale multi-item scale for variables under study. Results indicated that convenience, perceived credibility, and perceived usefulness had significant positive influence among students on the intention to adopt Internet banking. The findings from this research would be useful for banks in the subject area, particularly for students in Pakistan.
    Keywords: Internet banking; students of higher education; technology acceptance model; Pakistan
    JEL: G2 G20 G21
    Date: 2013–03–02
  20. By: Nuno Crespo; Nádia Simões; José Duarte
    Abstract: Given the economic importance of the tourism sector, countries actively compete for attracting tourism flows. In a bilateral perspective, an important determinant of the degree of competition is the geographical structure of tourism inflows, i.e., the relative importance of the different source countries. A higher overlap of these flows indicates greater competition. The goal of the present study is to propose a methodological approach to quantify this overlap. Taking some indicators traditionally used in international trade analysis as inspiration, we propose a methodology that measures, for each pair of countries, the degree of similarity between the geographical structures of tourism inflows. The methodology takes a multidimensional concept of structural similarity in order to incorporate relevant dimensions of international tourism flows today.
    Keywords: Tourism flows; Arrivals; Geographical similarity; Competitiveness; Index
    JEL: F14 L83
    Date: 2013–07–26
  21. By: Fisher-Vanden, Karen; Hu, Yong; Jefferson, Gary; Rock, Michael; Toman, Michael
    Abstract: Energy intensity has declined significantly in four Chinese industries -- pulp and paper; cement; iron and steel; and aluminum. While previous studies have identified technological change within an industry to be an important influence on energy intensity, few have examined how industry-specific policies and market factors also affect industry-level intensity. This paper employs unique firm-level data from China's most energy-intensive large and medium-size industrial enterprises in each of these four industries over a six-year period from 1999 to 2004. It empirically examines how China's energy-saving programs, liberalization of domestic markets, openness to the world economy, and other policies, contribute to the decline in energy intensity in these industries. The results suggest that rising energy costs are a significant contributor to the decline in energy intensity in all four industries. China's industrial policies targeting scale economies -- for example,"grasping the large, letting go off the small"-- also seem to have contributed to reductions in energy intensity in these four industries. However, the results also suggest that trade openness and technology development led to declines in energy intensity in only one or two of these industries. Finally, the analysis finds that energy intensities vary among firms with different ownership types and regional locations.
    Keywords: Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment,Water and Industry,E-Business
    Date: 2013–07–01
  22. By: Ryan Higgitt (IPC-IG)
    Abstract: Ongoing criticism over the efficacy of a modern development model characterised by an imbalance of power with respect to terms of action has in recent years spawned discussion regarding the utility of ?South-South cooperation? as a potential new development paradigm. We agree with many of the critiques levelled at development in its current form, particularly when considered in the context of the clearly growing disparity across the globe between those who have and those who have not (see Ortiz and Cummins, 2011). But we also have reservations related to questions as to what exactly South-South cooperation means, and indeed worry that this ?new? paradigm is not new at all if it merely reinforces a hegemonic view of two ?worlds?, a North and a South. The primary objective of this Working Paper is thus to contribute to an understanding of how South-South cooperation might distinguish itself as a genuine alternative to prevailing macro-level development approaches. (?)
    Keywords: Inclusive Growth, South-South
    Date: 2013–08
  23. By: Klaus Friesenbichler
    Abstract: This study analyses the diffusion of renewable energy (RE) technologies. It analyses the transition dynamics as the sector broadens its energy mix and changes its capital stock. This shift is found to be desirable from an environmental, geopolitical and economic perspective. Yet, it greatly increases the technical and industrial complexity, and is not Pareto-efficient. We focus on wind and solar power, and discuss their promoted deployment against the energy policy principles of the EU. Put drastically, the promotion of ‘sustainability’ undermined ‘competitive’ mechanisms. This has potentially adverse effects on the ‘security of supply’ due to the market design that seeks to keep prices low. RE outperforms conventional facilities. Emergency capacities, however, are also exiting, especially in Germany. If markets are seen as one, there seems to be a threshold of wind and solar power that the current back-up system can incorporate without risking the security of supply. The policy relevant crux lies in conflicting mechanisms: the top-down promotion and planning policies undermine the bottom-up market selection. Then again, without interventions the market does not provide the socially desired outcomes. If tensions aggravate further, the implementation of the new technology base is likely to stall. In addition, the generous promotion resulted in the fast deployment of RE, which may have shortened the ‘formative phase’ of the diffusion process. A longer formative phase would have created more learning effects and fostered more incremental innovations. In addition, costs of subsidies are allocated differently across countries. Mechanisms that allocate costs to the public budget have greater acceptance rates than budget neutral ones that assign costs to consumers. The latter affect households asymmetrically across income classes. Also ownership structures changed; a large number of actors now constitute the energy sector. Citizens increasingly appeared as producers and investors, which stimulated the social acceptance of RE, and in some cases unlocked initially unfavourable vested interests.
    Keywords: Cost incidence, diffusion, ecological innovation, economic strategy, electricity, European economic policy, industrial innovation, industrial policy, innovation, innovation policy, institutional reforms, multi-level governance, new technologies, ownership, policy options, renewable energy, security of supply, smart meter, social construction of technology, social innovation, sustainable growth, technology promotion
    JEL: O31 O33 P48 Q48 Q58
    Date: 2013–07
  24. By: Paulo Júlio; Ricardo Pinheiro-Alves; José Tavares
    Abstract: We examine the role of geographic, economic, and institutional factors in attracting Foreign Direct Investment (FDI) in Europe, using a cross-section of inward bilateral investments. We estimate and assess the expected benefits, the required reform efforts, and the efficiency of reform options corresponding to a convergence of Portuguese institutions to EU standards. We conclude that improving home institutions is likely to have a quantitatively very significant role in attracting FDI. Geographical and market size factors also play a role. Reforms promoting the independence of financial institutions and a leaner bureaucracy, lowering political risk and corruption, and improving the investment code may significantly affect the amount of bilateral inward FDI that is targeted to Portugal.
    JEL: F30 H00
    Date: 2013

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